Late Rental Payments: Are New Yorkers Scary? Or Just Like Us?
“If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.”
(John Paul Getty)
“I love payin’ rent when the rent is due…”
(from “Dear Mama” by 2Pac)
I remember years ago when I was coming out of college and my first job was in New York City (NYC). A friend of mine had an extra bedroom in the Lower East Side of Manhattan that I was able to rent. I was about to become a “real” New Yorker and ride the subway into work every day. It was an exciting time!
But, truthfully, it was also a scary time. I grew up in NJ watching television shows (NYPD Blue and Law & Order) and the news channels depicting rough city life. I rarely went into NYC as a youth and wasn’t really comfortable with life out of the suburbs. When I did go into NYC, there were homeless people begging for money, people urinating openly in the alleys, and throw up on the pavement. The subways were dirty and crowded and everything was so expensive. I was lost when I ventured out of the streets and avenues in the lower area of Manhattan and would ride the subways going the wrong way (Uptown? Downtown?). The whole environment was disconcerting.
However, when I started living in NYC and settling in, it took me a few weeks to realize that the people there were actually not scary. Now some were definitely strange, but most non-tourists were just like me. Every day, they were just trying to get to and from work and enjoy the time they had off when we weren’t working. Very few were trying to cause trouble or be threatening; they were just trying to make it.
From a rental home perspective, there seems to be a parallel from “scary New Yorkers” to “scary tenants”. The news is rife with tales of woe deriving from revolutionarily, disruptive tenants. Tenants that destroy a rental house, break all the windows, and don’t pay for six months. Or those that professionally squat in a rental home, live there rent-free for 2 years, and brazenly berate the owners when they stop by the house they own. Crazy stuff.
In my experience, most tenants are agreeable people who pay their rent regularly. And the late paying tenants who were on the brink of eviction? Most were not scary or even trying to be scary. They actually wanted to pay. Some lost jobs. Some tenants made poor choices and were irresponsible. But very few were maliciously trying to swindle the owner. At the end, almost all were trying to do their best to make things work- and sometimes they couldn’t pull it off. Life is a tough teacher sometimes.
Eviction is tough. Really, it is a game of losers, played by losers. The tenant loses out on their home, feeling of security, and usually most of their personal belongings. The owner loses a lot of money: marketing, repair, and legal costs, as well as the incoming rent. The property manager looks bad and may lose his job. No one is winning.
Leases are a partnership. The owner fixes major things and pays the macro property bills. The tenant lives there, pays rent, and takes care of the micro bills and fixes. And they should live happily ever after (or until the lease is up and one side decides to end it).
It can be scary when the partnership starts to break down. The best solution is to do everything possible to make it work. The tenant-landlord relationship is contractually intertwined. If the tenant has a problem, the landlord also has a problem. If the tenant loses, the landlord typically loses.
Smart landlords view tenants as such and and try to (cautiously) do what they can to keep them in the house (payment plans, extensions, etc.). Or, if that’s not possible, they work with the tenants to create a solution to offboard them as respectfully as possible.
(Most) tenants are not scary! They are like us or any regular New Yorker; they’re just trying to make it.
Happy Landlording!
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Late Rent & Library Books: What’s the Right Approach?
I remember approximately five years ago when the Charlotte Mecklenburg area libraries stopped charging late fees for overdue books.
My first thought was, “How will they ever get their books back on time?”
To be fair, they put some checks in place. If a book was two weeks overdue, no other books could be checked out on the account. If it was a month overdue, the cost of the book was charged to the account. But if the book was brought back within a year, the cost of the book was refunded to the account so there was no charge (it just created more work for the librarian!).
So if I checked out Calvin & Hobbes and got really into it, I’d have 364 days to get it back to the library without incurring any type of monetary penalty. That is really borrower friendly!
Local governments thought this “no late fee” policy for libraries wouldn’t materially affect their book returns as there was adoption throughout the country. And I don’t know of any libraries that stopped operating because of this policy change.
Would this policy work with rental payments? It would definitely be more tenant friendly!
As Charlotte property managers, we are not strangers to late rent payments. It is part of the rental home game. Rent is due on the 1st of each month and it is considered late if not received by the 5th of that month.
The biggest problem with late rent payments is that it slows the payment wagon. Rent money typically goes to the property manager who pays any vendor bills (if applicable) and then deducts their own fees (we need to eat too!). Then the money is sent to the owner.
The owner has mouths to feed as well. There are usually mortgages and other loans tied to the property that need to be paid. Then there is money that needs to go to property tax bills, home insurance, and sometimes an HOA. All these funds then feed other people and entities. The economy goes on. But it all starts with a single tenant making their rent payment!
So getting the rent on time is paramount for everyone downstream. If too many tenants decide to wait a year to pay their rent, the system crumbles. And for most landlords, if one tenant does not pay for months, it has a noticeable effect on their ability to pay others.
If this is the case, what should landlords do to facilitate on-time rental payments?
- Screen applicants well upfront: talk to past landlords (paying rent on-time is a habit!) and make sure the underlying tenant finances show they have that ability to afford their rental payments
- Send late letters and always charge late fees: there needs to be some sting. On-time rent is important!
- File for eviction after the 2nd payday: if there is no money then, it is really hard to catch up. Cutting losses on the earlier side will curtail longer term lateness.
I remember during COVID we allowed penalty-free late rental payments for months. The late rents shot up during that time, even with all the government money flowing in. With no penalty there was a relaxed effort, even for a few historically good payers.
Libraries have the luxury of being non-profit entities that have local government as a financial backstop to continue to operate. Smart landlords know they have a lot of mouths to feed (with no taxpayer back-up!) and need to be proactive to make sure tenants are doing their part.
Happy Landlording!
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